Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

Fintech products and services in Indonesia are mainly regulated by two government bodies, Bank Indonesia and the Financial Services Authority (OJK).

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

Bank Indonesia Regulation No. 19/12/PBI/2017 regarding the Organisation of Financial Technology, dated 30 November 2017, regulates fintech activities that require licensing or registration in relation to monetary stability, financial system stability and payment systems, as follows:

  • payment system activities, including authorisation, clearing, final settlement and implementation of payment; for example, blockchain or distributed ledgers for the provision of fund transfers, electronic money, electronic wallet and mobile payments;
  • market support (ie, activities that use information or electronic technology, or both, to facilitate the faster and more cost-efficient provision of information to the public on financial products and services; for example, the provision of information comparing available products or services in the financial services area);
  • investment management and risk management for the provision of online investment and online insurance, among others; and
  • lending, financing or funding and capital raising including peer-to-peer lending or information technology-based fundraising (crowdfunding).

 

Digital financial innovation, commonly referred to as fintech, is regulated from a financial services perspective under OJK Regulation No. 13/POJK.02/2018, dated 16 August 2018, regarding Digital Financial Innovation in the Financial Services Sector. This regulation covers:

  • transaction settlement: this focuses on, among other things, investment settlement;
  • capital raising, such as equity crowdfunding, virtual exchange, smart contracts and alternative due diligence;
  • investment management; for example, advance algorithms, cloud computing, capability sharing, open source information technology, automated advice and management, social trading and retail algorithmic trading;
  • fundraising and fund disbursement: this includes activities such as peer-to-peer lending, alternative adjudication and third-party application programming interface;
  • provision of insurance; for example, sharing economy, autonomous vehicles, digital distribution and securitisation and hedge funds;
  • market support; for example, artificial intelligence or machine learning, machine readable news, big data, social sentiment, market information platforms and automated data collection and analysis;
  • other digital finance supporting activities, such as social and eco-crowdfunding, Islamic digital financing, e-waqf, e-zakat, robo-advisers and credit scoring; and
  • other financial services activities; for example, invoice trading, vouchers and products using blockchain-based applications.

 

The Indonesian government issued Government Regulation No. 80 of 2019 regarding Trade Through Electronic Systems, dated 25 November 2019 (GR 80/2019). It then issued Minister of Trade (MOT) Regulation No. 50 of 2020 regarding Provisions on Business Licensing, Advertisements, Guidance and Supervision of Business Practitioners in Trade Through Electronic Systems, dated 19 May 2020, as an implementing regulation for GR 80/2019. These regulations impose new obligations for organisers of trade through electronic systems (PPMSE), which is any business practitioner that provides electronic communication facilities used in trade transactions. A PPMSE operating from outside Indonesia and that fulfils certain criteria is now required to appoint a representative in Indonesia and, consequently, must have a foreign trade company representative office in the country. PPMSE that have completed transactions with more than 1,000 consumers in a year or have delivered more than 1,000 packages to consumers in a year, or both, are required to appoint a representative in Indonesia.

Consumer lending

Is consumer lending regulated in your jurisdiction?

Consumer lending is regulated in Indonesia, with a particular focus on information technology-based money lending services (peer-to-peer lending), as regulated under OJK Regulation No. 77/POJK.01/2016 regarding Information Technology-Based Money Lending Services, dated 29 December 2016. The OJK has the authority to regulate, register and issue licences, as well as supervise the fintech consumer lending industry. A company engaging in the provision of peer-to-peer lending activities can have a maximum foreign ownership of 85 per cent, which means at least 15 per cent of the ownership must be in the hands of Indonesian parties. A company that wishes to register with the OJK is required to have a minimum issued and paid-up capital of 1 billion Indonesian rupiah (about US$70,000). Once an applicant is registered, it will have one year to apply for a licence from the OJK, and the company’s minimum issued and paid-up capital must then be 2.5 billion rupiah (about US$175,000). A company engaging in the provision of peer-to-peer lending is not allowed to engage in any other business activities. The regulation refers to information technology-based money lending services (peer-to-peer lending) as the provision of financial services that allow the lender to meet the borrower in the framework of entering into a lending agreement in rupiah directly through an electronic system by using the internet.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

Currently, the trading of loans in the secondary market in Indonesia is not specifically regulated and there is no specific restriction on this activity.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

The prevailing regulations do not categorise activities into collective investment schemes. They only specifically regulate alternative finance products in the form of equity crowdfunding platforms. Peer-to-peer lending is described as an information technology-based money lending service, which is specifically regulated under a different regulation. Equity crowdfunding is regulated under the auspices of the OJK, through OJK Regulation No. 37/POJK.04/2018 regarding Equity Crowdfunding, dated 31 December 2018. The OJK has the authority to regulate, register and issue licences, as well as supervise equity crowdfunding activities.

Alternative investment funds

Are managers of alternative investment funds regulated?

Collective investment in the form of an equity crowdfunding platform is described as the provision of share offering services whereby the issuers sell shares directly to investors through an open electronic system network, as governed by OJK Regulation No. 37/POJK.04/2018 regarding Equity Crowdfunding, dated 31 December 2018. Collective investment undertakings through the internet, whereby capital is raised from a number of investors and invested in accordance with a defined investment policy for the benefit of those investors, are not specifically regulated.

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

Marketplace lending is not specifically regulated in Indonesia. Peer-to-peer lending is specifically regulated under OJK Regulation No. 77/POJK.01/2016 regarding Information Technology-Based Money Lending Services, dated 29 December 2016. It provides the OJK the right to regulate and supervise peer-to-peer lending activities, including handling the registration and licensing of peer-to-peer lending platform providers. Peer-to-peer lending in Indonesia is described as the provision of financial services whereby the lender meets the borrower in the framework of entering into a lending agreement in rupiah directly through an electronic system by using the internet.

Crowdfunding

Describe any specific regulation of crowdfunding in your jurisdiction.

To date there is no specific regulation that deals with donation-based crowdfunding in Indonesia. Equity crowdfunding covers the provision of share offering services conducted by issuers to sell shares directly to investors through an open electronic system network. Equity crowdfunding is regulated under OJK Regulation No. 37/POJK.04/2018 regarding Equity Crowdfunding, dated 31 December 2018. Under this regulation, a licensed equity crowdfunding platform provider or organiser is able to provide access for issuers (Indonesian limited liability companies) to sell their shares to investors that are also using the platform. An equity crowdfunding platform company is required to be an Indonesian limited liability company or an Indonesian cooperative with a minimum issued and paid-up capital of 2.5 billion rupiah (about US$175,000) and to have registered with and received a licence from the OJK to provide, manage and operate the equity crowdfunding platform.

Invoice trading

Describe any specific regulation of invoice trading in your jurisdiction.

The prevailing regulations do not specifically address invoice trading in Indonesia.

Payment services

Are payment services regulated in your jurisdiction?

Payment services in Indonesia are regulated mainly by Indonesia’s central bank, Bank Indonesia, which is in charge of regulating payment system activities in Indonesia. Bank Indonesia recently issued Bank Indonesia Regulation No. 22/23/PBI/2020 regarding Payment Systems (PBI 22/23), dated 30 December 2020. PBI 22/23 will be effective as of 1 July 2021 and will be the main regulation for payment systems in Indonesia, revoking Bank Indonesia Regulation No. 18/40/PBI/2016 regarding the Organization of Payment Transaction Processing, which was issued in 2016. PBI 22/23 reclassifies the existing licences for payment system activities by issuers, acquirers, payment gateway providers, e-wallet providers and fund transfer providers into two main categories: (1) payment system providers (front-end providers) (PSPs) and (2) payment system infrastructure providers (back-end providers) (PSIPs). PSPs are open to 85 per cent foreign share ownership (with a maximum 49 per cent of shares with voting rights held by foreign shareholders), while PSIPs are open to 20 per cent foreign share ownership (with a 20 per cent maximum of shares with voting rights held by foreign shareholders).

Open banking

Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?

To date there is no law or regulation that requires financial institutions to make customer or product data available to third parties to promote competition, unless to the relevant government agency for supervision purposes or for law enforcement purposes.

Insurance products

Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?

In principle, the selling and marketing of insurance products in Indonesia is regulated and licensed by the OJK, although there seems to be no differentiation yet between fintech companies and companies that engage in the conventional selling and marketing of insurance products. In practice, licensed insurance companies in Indonesia have been selling their products over the internet, through their own platforms or by cooperating with other parties (eg, e-commerce platforms or e-money platforms) to assist in facilitating the selling and marketing of their insurance products. The OJK is still in discussions over whether unit-linked products can continue to be sold without a face-to-face meeting with the potential insured party. The prevailing regulations require unit-linked products to be sold with a face-to-face meeting that is used to explain the product to the potential insured party.

Credit references

Are there any restrictions on providing credit references or credit information services in your jurisdiction?

There are restrictions on providing credit information services. In Indonesia, credit reports can only be issued by a credit bureau licensed by the Financial Services Authority (OJK). A credit report is defined under OJK Regulation 42/POJK.03/2019 regarding Credit Information Management Agencies, dated 31 December 2019, and Bank Indonesia Circular Letter No. 15/49/DPKL regarding Credit Information Management Agencies, dated 5 December 2013 (together, the Credit Bureau Regulation), as a product or service generated by a credit bureau in writing, verbally or by some other method, sourced from credit data and other data owned by the credit bureau. The credit report generated by the credit bureau, among other things, contains information on:

  • the feasibility of the debtor or customer to obtain funds;
  • the track record of the debtor or customer in fulfilling its fund provision obligations;
  • the ability of the debtor or customer to fulfil its fund provision obligations;
  • the character of the debtor or customer; and
  • other information that may be utilised to assess the abilities of the debtor or customer.

 

Pursuant to the Credit Bureau Regulation, a credit bureau engages in the business activities of collecting credit data and other data, and processing credit data and other data to generate a credit report.

The Credit Bureau Regulation also specifically mentions that a credit bureau must be in the form of an Indonesian limited liability company and is subject to applicable foreign shareholding restrictions. In addition, a credit bureau must obtain a business licence from the OJK to conduct its business activities. While the total ownership of one or more foreign parties in a credit bureau is limited to 20 per cent, if one foreign party owns more than one credit bureau that foreign party’s total ownership in all the credit bureaus combined is limited to 20 per cent.

In collecting and processing credit information, a licensed Indonesian credit bureau obtains credit data from the OJK. The credit data from the OJK consists of data submitted to it by financial institutions. A licensed Indonesian credit bureau may also cooperate with financial institutions to obtain credit data or financial institutions and non-financial institutions for other data, or both. A credit bureau must make an effort to ensure that the source of the data informs the relevant debtor or customer of how the credit data and other data will be utilised. Credit data is defined as data regarding the condition of funding facility, funding from non-bank institutions and other facilities that can be deemed similar to the foregoing.

Other data in relation to a credit bureau is defined as data other than credit data that can be used to describe the capability of a certain party in fulfilling the party’s financial obligations.

Law stated date

Correct on:

Give the date on which the above content is accurate.

5 June 2020.